Exploring and keeping readers up to date with the growing economic and political ties between China and South America. Including all the good stuff: Commodities, Energy, International Finance, South-South Cooperation, Microfinance and more

In honor of ushering in the new year I've decided to officially change the name and address of this new reel. When I've been able to apply my full attention to updating and writing my own analysis of political and financial news, I've focused on events pertaining to countries in South America or China. When possible, I especially try to share stories and my personal take on cooperation between emerging markets of the "developing south." Third, due to China's dire need for commodity inputs to fuel their development and the abundance supply of many of the commodities needed by developing nations in South America, commodities are an obvious area which I will attempt to report stories that may not garner much attention in main stream press.

Welcome to South-South Cooperation. A humble news and analysis site on the vast internet, updated by a humble Peruvian-American economist from New York City who simply wants to share some thoughts and interesting news on topics frequently marginalized by the big names in media.

Tuesday, December 2, 2008

On December 1-3, Uruguay Energy Ministry and ANCAP, the National Oil Company, will launch the offshore licensing round for exploration and exploitation of gas and oil. The blocks on offer, lie in the Punta del Este and Pelotas basins, where water depths range from 50 to 1500 meters, as well as another basin further offshore called Oriental Del Plata. The blocks' areas range from 2,500 to 10,000 square kilometers...

PetroLatina has announced a further operational update to that released on November 7, 2008.

La Paloma

The Company commenced drilling Colon-1, the first exploratory well to be drilled on the La Paloma block, located in Middle Magdalena Valley, Colombia, on Sunday, November 24, 2008. The Colon-1 well has been drilled vertically to a total depth of approximately 600 feet, to date. Drilling continues to be undertaken vertically to an expected total depth of approximately 9,072 feet in order to test the La Paz, Lisama and Umir formations. Drilling is scheduled to take 25 days in total at a cost of approximately $6 million...

Petrobras announced that platform P-53 kicked-off its operations yesterday, November 30. This is the first production unit installed in the Marlim Leste field, in the Campos Basin.

The P-53 unit has total production capacity of 180,000 barrels per day of heavy oil, 20 degrees API, and compressing capacity up to 6 million cubic meters/day of natural gas. The platform's oil production will be offloaded to shore by shuttle tankers with the assistance of Autonomous Re-pumping Platform PRA-1 and the FSO Cidade de Macae. Part of the gas that is produced will be consumed by the platform itself as fuel to generate electricity, and the remaining will be exported to shore via the Campos Basin's gas network. The platform will reach peak production in the first half of 2010.

GeoPark Holdings Limited has announced the successful testing of the new Manekenk 1 well on the Fell Block in Chile at an initial rate of approximately 1,300 barrels of oil per day equivalent (boepd). Geopark operates and owns a 100% working interest in the Fell Block...

Lima, Dec. 01 (ANDINA).- Production in Peru's mining and hydrocarbons sector expanded 4.57% in October from the same month last year, as the mining sub-sector increased 2.72%, the National Statistics Institute (INEI) said Monday...

PetroChina Co. has started developing an offshore block in Bohai Bay with an output target of 3 million metric tons a year or 60,247 barrels a day, parent company China National Petroleum Corp. said Monday.

The Yuedong block, located in shallow water near Liaoning province, has rich reserves of heavy oil, CNPC said on its Web site, without elaborating.

Yuedong is part of the Liaohe field, China's largest heavy oil field, with annual output at 12 million tons a year or 240,986 barrels a day...

China North East Petroleum has announced preliminary results for its October 2008 oil production.

Crude oil production for the month ended October 31, 2008 increased 135%, or 40,479 barrels, to 70,545 barrels from 30,066 barrels for the month ended October 31, 2007. On a sequential basis, crude oil production increased 4,627 barrels, or 7%, compared to the month ended September 30, 2008...

Monday, December 1, 2008

Lima, Nov. 30 (ANDINA).- The China Development Bank (CDB) is interested in supporting infrastructure and agricultural projects in Peru as part of a cooperation agreement recently signed with Peruvian state-bank Banco de la Nación (BN).

"China Development Bank is very interested in infrastructure and agricultural projects that involve development of rural communities in Peru," BN general manager Julio del Castillo told Andina news agency...

Dec. 1 (Bloomberg) -- The best hope to keep the global economy growing may be people like Wei Yufang. A peasant who farms a small plot beside the mud-brown Huaihe River in central China, Wei has a modest dream: to buy an air conditioner to give her family relief from the dusty heat that each summer envelops Xiaogang (Little Hill) village in Anhui province.

With economies from the U.S. to Japan in recession, Wei and the other 2.8 billion people in Brazil, Russia, India and China may provide the consumer demand needed to counter the slump.

Jim O’Neill, the Goldman Sachs Group Inc. economist who in 2001 coined the acronym BRIC from the initials of the four big emerging economies, says the faster growth investors have come to expect from these countries will survive this crisis. O’Neill, who is based in London, says the citizens of the BRIC nations are poised to spend more. “The BRIC consumer is going to rescue the world,” he says...

Dec. 1 (Bloomberg) -- China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing major economy.

The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e- mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction...

Russian president Dmitri Medvedev said he was very satisfied with his Latinamerican tour which took him to Peru, Brazil, Venezuela and Cuba because it enabled to re-establish strong links with the region.

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“Latinamerica is a region developing fast, which has a concentration of significant intellectual and natural resources, and most important the peoples of the region want to cooperate with Russia”, added Medvedev

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“We are prepared to increase political, economic and military cooperation with Latinamerican countries and their leaders, particularly in a world with so many security problems and challenges.” ...

Sunday, November 30, 2008

Six months ago when commodity prices where at record high's it seemed as if South America was entering a golden age of prosperity. Or at least that they where on track. Of course many analysts and “experts” predicted there would be trouble if prices fell back down to reality. None the less, it seemed that surging demand from Asia and the lack of investment in supply capacity throughout the 80's and 90's would be sufficient to keep the prices of various commodities up.

I was personally of the camp which believed prices had come up a bit too fast, but where no less going to stay well above what they where in the late 90's and early 2000's. In the long-run I still believe this will be the case, however the recent global financial has proved me horribly wrong in the short-term.

It does however seem that one thing has been made clear from the recent crisis. At least some of the countries in South America have become better at managing their financial systems and internal economies. Many nations saved, paid off their international debt and invested wisely. Other's didn't and will pay the price (Argentina I mean you).

Last week Peru's transport and communication minister Veronica Zavala presented congress with a 3.3 billion sol ($1.07) budget proposal. The money according to BNAmerica's will be allocated to various segments of the transport sector. This includes highways, roads, airports, trains and the communication sector.

Andina.com reports that the Minister of the Economy and finances believes these 49 projects are aimed to keep Peru growing between six and seven percent for the next year.

“We won't allow any reduction in the public spending, consistent with a growth between six and seven percent. To face a possible reduction of fiscal income due to a loss of international markets, if necessary, there is a number of projects ready to fulfill this goal,” stated Luis Valdivieso.

Interestingly enough, little old Uruguay seems in good position to weather the financial crisis, while it's bigger neighbor, Argentina, does not. The government seems confident that Uruguay can get through this crisis, even if Argentina continues to edge towards economic upheaval, as evident by the countries recent seizure of private pension funds, the governments horrible handling of recent protests and generally scaring away international investors...

Friday, November 28, 2008

With the world economy faltering, recovering, crashing, entering crisis, deflating, **input whatever other term you've been reading** many are hoping China will some how cushion the global down turn. Lets consider this from both ends of the spectrum.

There's one side of analysts, experts, observers, etc who believe the Chinese economy as the largest contributor to global GDP growth the past few years is in a position in which it can help the global economy move through this economic depression. Then there's the other side that inexorably links the Chinese economy to rich country demand for their cheap exports... which is decreasing at an alarming rate according to the figures.

From the perspective of a young economist who is currently living in Suzhou, China the truth lies somewhere in the middle. Before you (the readers) close this page and assume that's the obvious answer hear me out. It's not that simple...

From the window of the pizza place, which offers me high speed internet where I am currently writing this post from I see the following.

Fireworks exploding in the distance to celebrate the grand opening of something big. I don't know for what, but if i've learned anything from the past few months of living in Suzhou, a show of this caliber means the following: the government is celebrating some major achievement, a big night club has something to brag about, or perhaps a shopping center or a residential complex is opening its doors. Fireworks are a usual tactic employed as way to dazzle the populous, attract business and of course... to ward of bad spirits (which is what the tradition of exploding fireworks in China is traditionally for).

I can also see various cranes in the distance, where workers are building various new structures six days a week. These include 15-20 floor apartment complexes, 20-45 floor office buildings and other structures which I would guess will have something to do with the government.

The third thing I can see, which is worthy of mention is a giant fenced off whole in the ground which blocks the pedestrians view of the construction work underway for a new subway system set to open in 2010.

These points support the first side of the story. The Chinese economy, on the domestic front is going to keep growing even if the rich countries of the world slide even further into recession. A “Pandora's Box” of sorts has been opened here in China. The opening of the Chinese economy, the robust growth of the past two decades, the massive migration of hundreds of million of rural residents to urban centers, massive inflows of FDI and a variety of other factors have created a situation where the central government must needs to either facilitate to the best of its ability or risk imploding from within.

The recent decrease in commodity prices will only help China keep its modernization / urbanization/ domestic growth (whatever you want to call it) going. Six months ago, I was analyzing how demand was so strong in China that it mattered little in the long run how high the prices of commodities went, because in the end the Chinese would not abandon their aspirations to well... keep growing. From this perspective, plummeting commodity prices (much to the detriment of my senior thesis in which I predicted they would keep rising) is a blessing in disguise.

China's recent $586 billion stimulus package and the record slashing of Chinese interest rates is an effort by the government to keep this going. Infrastructure, housing and all that jazz will continue. This means jobs and therefore continued consumption by consumers. This also means China will keep buying the commodity inputs they need to build. So, to conclude this side of the story, this means China will continue to grow.

However, and now here comes the “dark side.” Even the two trillion plus dollars in foreign reservers Beijing claims will finance all of this, can not and will keep this going indefinitely. The money will run out, or more likely simply start to no longer be worth spending if the rest of the world, particularly the rich world doesn't get out of this global economic crisis.

Living in the wealthy Jiangsu province, home to the city I live in (Suzhou), Shanghai, Nanjing, Hangzhou (VERY wealthy cities), and various government projects I'd call the crown jewels of the governments efforts at modernization it is hard to imagine what the rest of the country is like from time to time. Due to the lack of internet and the lack of available information I havn't exactly been up to date on certain things.

“Small companies face a “tough winter,” said Li, whose organization claimed 76,000 members in the first half of this year. Two-thirds of China's small toy makers closed in the first nine months, according to customs data."

So in conclusion... as I stated above, the truth lies somewhere in the middle. If the rich countries of the world don't start buying again, China will stop growing as fast as it has been. That is just how it is. A large portion of the Chinese economy is still heavily depended on exports, and if that disappears it doesn't matter what happens on the domestic front.

China will have to face the facts. The effects will be catastrophic and horribly de-stabilizing. Which is why China is going to try to do everything in its power to present such a catastrophe from occurring, and if that means helping out more to revive the global economy I think China will assume a more active leadership role. So far it seems they have. How far they will go will only be seen in the months to come.

It's anyone guessing game at this point. Lets see where the next few months lead.

Thursday, November 6, 2008

Lima, Nov. 05 (ANDINA).- First Deputy Director of the International Monetary Fund, John Lipsky, attending the XV APEC Finance Ministers’ Meeting met with the Peruvian Minister of Economy, Luis Miguel Valdivieso and with officials of the Central Bank of Reserves to discuss about the global financial crisis and its impact in Peru.

“As representative of the IMF I trust that Peru is ready to face the global financial crisis and it will continue with its sustainable growth within this context. Both, Peru and Chile, have good conditions to face these swings of the international economy”, stated the official who, at the same time, congratulated president-elect Barack Obama of the United States of America.

2) Peru and Chile to become world economy locomotive machines according to Andina.com

Trujillo, Nov. 05 (ANDINA).- Peru and Chile will become world economy locomotives due to their economic dynamism and solid basis, and before the lower growth rate to be registered by United States and Europe as a result of the international financial crisis, Chile’s Finance minister, Andrés Velasco, said Wednesday.

“Emerging countries of Asia, Latin America, and Africa will continue growing next year, and in some way, they will become the locomotives of the world economy. Therefore, our voice is more important than ever, which is based on our own experiences and achievements", he said.

He pointed out that the international situation is difficult; however, Latin American countries like Peru and Chile have taken preventive measures and can face the financial crisis with their fiscal discipline and strong fundamentals, as well as with their high levels of investment, external balance, resources and liquidity.

Lima, Nov. 05 (ANDINA).- Peru's natural gas production reached 98,906.68 million cubic feet from January to October 2008, registering a growth of 30.01 percent compared to the same period last year, state oil agency PeruPetro reported Wednesday.

PeruPetro pointed out that the production increase was mainly because of greater consumption in electric power stations.

The average daily production of natural gas in October was 353.74 million cubic feet, which represents a reduction of 5.03 percent compared to last September.

Nov. 3 (Bloomberg) -- India and China are accelerating efforts to prop up growth as a global slump threatens the world's fastest-expanding major economies.

The Reserve Bank of India on Nov. 1 lowered its benchmark interest rate for the second time in two weeks, and for the first time in 11 years reduced the amount of money lenders are required to keep in government bonds. China's central bank removed temporary controls over loans to maintain ``relatively fast'' growth, Xinhua News Agency reported Nov. 1, three days after cutting its key rate for the third time in two months.

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Emerging Asian economies that account for one-fifth of world growth are being dragged down as their main markets in the U.S. and Europe contract, increasing the likelihood of a global recession. Policy makers in India and China are also boosting spending to prevent their economies from going under.

China's stocks fell to the lowest in almost two years, led by industrial companies, after a report showed China's manufacturing contracted amid the worst financial crisis since the Great Depression.

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The CSI 300 The CSI 300 has slumped 69 percent this year, making it Asia's worst-performing benchmark index. Stocks have fallen amid concern demand for Chinese products will decline as the global credit crisis drags the world's largest economies into recession.

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Net income at the 487 companies listed on the Shenzhen Stock Exchange's main board rose 3.4 percent in the first three quarters, a fraction of the 89 percent increase a year earlier, according to data in a statement released by the bourse today.

Economy Slows

China's economy grew at the slowest pace in five years in the three months through September as export orders shrank and industrial production waned. The expansion cooled for a fifth straight quarter, to a 9 percent gain from a year earlier.

For the first time since 1997, the Reserve Bank of India on Nov. 1 deployed all three of its main tools to shore up growth after inter-bank lending rates climbed to 21 percent. Economists at Yes Bank Ltd. and Standard Chartered Bank predict more interest-rate cuts following the weekend reduction.

``India's central bank has no other option but to focus on economic expansion," said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. ``Global cues have turned against growth and it was surprising to see the hawkish tones on inflation'' last month.

Subbarao, less than two months into the job, has grappled with monetary policy at a time when inflation is double the central bank's target and a global downturn threatens to hit the economy. The central bank's renewed focus on growth aligns with Prime Minister Manmohan Singh's push to buoy the economy ahead of elections due by May.

The decision to cut rates on Nov. 1 was a U-turn from the stance Subbarao spelled out in his first statement. At that time, he said price pressures could come from lower farm production, volatile oil prices and a weaker rupee.

4) BRIC see no relief even as rally lures stock bulls -- courtesy of Bloomberg LP

Nov. 3 (Bloomberg) -- Forget last week's record 20 percent gain in emerging-market stocks. Hard times are ahead for equities in Brazil, Russia, India and China, some of the world's biggest money managers say.

Even with developing-nation shares trading at their cheapest levels in a decade, financial crises in Hungary and Pakistan that required international rescue packages and concern that economies from Turkey to Argentina are also teetering prompted investors to pull out of emerging-market funds at a record pace.

RBC Capital Markets cut its estimates on Oct. 23 for 2009 economic growth in Brazil to 2.5 percent from 4 percent and Russia to 4 percent from 6 percent. That may undermine analysts' forecasts for a 14.5 percent increase in earnings at a time when the global credit crunch seized up lending from Sao Paulo to Seoul and a slump in 24 of 25 developing-nation currencies last month inflated the costs of repaying dollar-denominated debt.

Nov. 3 (Bloomberg) -- Brazil's central bank may provide signals on the outlook for interest rates after halting six months of increases to weigh an economic slowdown against inflationary pressure from a weakening currency.

Economists will be closely reading the minutes from the bank's Oct. 28-29 meeting, to be published Nov. 6, to gauge whether its unanimous decision to pause rate increases herald a change in policy.

6) After Colorado rally Obama says U.S. - Peru ties to grow stronger -- courtesy of Living in Peru

RPP Noticias, a local news agency in Peru had the chance to speak with Barack Obama after his final campaign stop in Colorado on Saturday November 1.

After a festive meeting with thousands of jubilant supporters dancing in the streets, Obama affirmed to RPP reporters that the relationship between the United States and Peru would grow closer and stronger.

RPP correspondents explained Obama made these statements as he was leaving his rally, which was compared by Peru reporters to the presentation of a famous show-business star.

Sunday, November 2, 2008

Brazil frequently enjoys assuming the role as a leader in the developing world of promoting South-South Cooperation. This time the nation has agreed to help Cuba explore for oil and gas. Brazil's Petrobras is expected to sign an agreement with Cuba for deep-water oil and gas exploration during President Lula da Silva's two day visit to the island this week.

Cuban media is reporting both sides will “sign a contract for the production of hydrocarbons.” No further details have been reported, but the Cuban Foreign Minister Felipe Perez Roque has stated he “anticipates Cuba will sign in the presence of Lula da Silva a very important agreement for oil exploration in deep water.”

Although the details are shady at best, it no less is a sign of Brazil further developing its reach in promoting economic cooperation among developing nations, with the pretext of mutual economic development.

2) Petrobras Transpetro unit won't delay 49-tanker plan (update 2) courtesy of Bloomberg LPOct. 30 (Bloomberg) -- The transport unit of Petroleo Brasileiro SA will be able to maintain a 49-ship fleet expansion program because it has sufficient financing from a government fund and can ignore the world credit crunch, the unit's president said.

Brazil's Merchant Marine Fund, managed by state-development bank BNDES, has enough cash to pay the $2.5 billion needed for 26 tankers that have already been ordered, said Sergio Machado, president of Rio de Janeiro-based Transpetro, as the unit is known. The fund can also finance another 23 ships that will be ordered by the end of the year, he said.

3) Favorable 2009 beef export prospects for Brazil and Argentina, courtesy of Merco PressBeef exports are forecast to rise nearly 2% during 2009 as gains by Brazil, Argentina and the United States outweigh downturns in Australian and New Zealand shipments according to the US Cattle network.

As the world’s leading trader Brazilian exports are forecast to spring back nearly 5% to over 2.0 million tons. Shipments are projected to decline in 2008 for the first time since 1996. However, by overcoming sanitary barriers, it is now poised to regain sales to Chile, EU-27 and other key markets...

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In Argentina exports are forecast to expand 20% to 480,000 tons in 2009 after plummeting an expected 25% in 2008.

The rebound stems from the Argentine government setting a higher export quota, cattle and beef supplies not expected to be limited by farmer strikes, and thermo-processed product to be exported outside of the quota.

Venezuela said Wednesday it was adding 10.251 billion barrels of crude to its national reserves as part of an ongoing review of its hydrocarbon reserves.

With this increase, the oil-rich country's total reserves now amount to 152.561 billion, making Venezuela the country with the second largest crude reserves, the Venezuelan oil ministry said in a statement.

Click here to access the full article from Rigzonehttp://www.rigzone.com/news/article.asp?a_id=68576

5) Chile trims 2008 copper output forecast again, courtesy of the Mining-JournalChile on Wednesday trimmed its 2008 copper output forecast for the second time since July, this time to 5.45Mt, citing operational issues but not slumping prices for the metal.

Limited financing due to the global credit crisis may delay or cancel some new projects, said Eduardo Titelman, executive vice-president of Chile`s state copper commission Cochilco, one of the world`s leading copper think-tanks.

Copper prices rose above US$2/lb on Wednesday, but they remained less than half the record levels of over US$4/lb hit in July. A global credit crunch and fears the world could enter a recession have hit demand for metals like copper, heavily used in the auto and construction industries.

Thursday, October 30, 2008

On the ground, things don't seem so bad in China. As I report from Suzhou, China I see construction booming on both a residential level on in terms of infrastructure. However as Bloomberg LP paints in a article you can view here, things aren't so pretty on a macro level.

Actually they may depend on what you think "pretty" is. Economic growth will slow this year. 3rd Quarter growth in 2008 when released is expected to come in at around 9%, down from 2007's astounding 11.9%. Considering the state of the global economy many argue 9% is still quite healthy. However for a country seeking to fast track its economic development and solidify its position in the global economy the slowing growth rate is not welcome news.

The government is acting quick to stem the problem, having already reduced interest rates three times in the past two months. Will it be enough? Probably not...

For one, the reckless speculation from abroad and domestically on Chinese equities has fully exploded in investors faces this year (including my own). The CSI 300 is down a whopping 69% in 2008 so far, and has not seen the rallies other Asian markets like Hong Kong, Korea and Japan have seen when the west introduced their respective bailouts, lowered interest rates and set up new lending facilities.

Chinese Media, Xinhua reports export orders dropped in the 3rd quarter to their lowest level since 2005. Home sales have plunged 59% in Beijing and 39% in Shanghai so far in 2008.

All this looks bleak, but a casual observer may add that between 2005 and 2008, both Beijing and Shanghai have continued to grow rapidly. Few can deny the changes which have manifested in each city in the past 3 years, not to mention the rapid change which occurred between 2000-2005.

My observations are simple. China was indeed growing too fast for its own good, this financial crisis is simply bringing it back down to reality. China will continue to grow but due to the nature of its export oriented economy it must do so within the context of the world economy. All the while it does have the capacity to cushion its own slowdown with its domestic economy and macro policies which will help spur growth in the domestic market.

"The winter is coming. It may be a good timing for Chinese firms to go out to buy resources," Liu Guoping, director of the exploration department at China Nonferrous, said at the conference. Liu said some overseas exploration firms might find it difficult to obtain funds to finance their projects, giving cash-rich Chinese firms good opportunities to buy their assets...

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Liu at China Nonferrous said Chinese firms had acquired copper resources in the past few years at high prices as China`s need for the raw material rose. The demand for imported copper materials would stay strong in the long term. Jiangxi Copper, China`s top producer and the owner of the country`s largest open-pit copper mine in Jiangxi, will need to import 70% of its materials for refined copper production by the end of this year when its capacity rises by nearly 30% to 900,000t/y, president Li Yihuang said.

Click here to view the full article, courtesy of Reuters and Mining Journal

2) Saipem wins $1.1 billion contracts in Peru and Venezuela

Italian oil and gas industry contractor Saipem announced it had won onshore drilling contracts in Peru and Venezuela worth a total value of about $1.1 billion...

Cuu Long Joint Operating Co. has commenced oil production from the Su Tu Vang (Yellow Lion) field located in Block 15-1 offshore Vietnam, according to a Dow Jones Newswire citing the Thoi Bao Kinh Te newspaper. Su Tu Vang, estimated to be Vietnam's fourth-largest field, is situated in the Cuu Long Area near the Bach Ho, Rang Dong and Ruby Fields and was discovered in 2001. The 'Yellow Lion' field is set to produce 65,000 barrels of crude per day...Click here to access the full article, courtesy of Rigzone

Oct. 28 (Bloomberg) -- As many as 20 of the 100 deepwater oil rigs on order worldwide may be delayed or canceled as loan availability erodes, possibly slowing developments including the biggest petroleum discovery in the Americas in three decades...

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Norway's Sevan Marine ASA has lost 70 percent of its value this month amid concern it won't get financing for two drilling units. Houston-based Atwood Oceanics Inc. said Oct. 16 that it won't exercise an option to build a deepwater rig at Jurong Shipyard Pte. Ltd. in Singapore. New rigs were being ordered to ease a shortage of deepwater gear needed to exploit offshore prospects like Brazil's Tupi, announced in November by Petroleo Brasileiro SA, or Petrobras.

``Petrobras would probably be the dominant oil and gas company that gets hit by this,'' Uhlmer said.

Jose Sergio Gabrielli, chief executive officer at state- controlled Petrobras, said the Rio de Janeiro-based company may need to help find financing for some of its suppliers. ``We are concerned about the supply chain of products for Petrobras,'' Gabrielli told reporters at a conference in Houston last week...

Sunday, October 26, 2008

I must apologize to all those who once counted on this blog for perspectives, news, analysis and all the rest that used to be provided on a daily basis. Sadly Internet restrictions and lack of access in the far east have made it difficult, sometimes impossible to access blogger.

I write to you from the beautiful, bustling, urbanized yet serene city of Suzhou, China.

I had planned to keep this website going strong during my year long stay in China. Sadly, it is incredibly difficult to update from here. I will continue to try, and I have a new internet connection arriving in a few days, which I hope will allow me more privileges as I am being forced to provide everything down to my blood type in order to obtain (hehe).

While my connection lasts i'll get what word I can out. Everyday as I check in with the world via my blackberry I see stock markets plummeting, governments hosting meeting to address the crises, blame being dealt left and right, and my portfolio sadly decrease in value more and more.

While on this side of the Pacific, many express concern and legitimate worry that something horrible is on the verge of beginning (a global recession). Meanwhile, from a rational point of view, I don't exactly see the world crumbling into pieces. Buildings are still going up, the malls in China are full, people are swiping their credit cards, mortgages are being taken to buy apartments and houses, and people have generally remained hopeful of a brighter future.

Whether it will still be like this 6 months from now when the economic problems of the West more fully manifest, I can not tell. What I can say for certain is it is not in China or any other emerging market of Asia's interest to see the United States and Europe come tumbling down. There is still tremendous room for China to grow, and grow it will. Factories which produce goods for export to the West will shut, but the economy will re-adjust with a heavier focus on the domestic front.

Just as the United States has centers of economic activity - New York, California, Texas, etc, so does China. Beijing, Shanghai, the Southern Coast, the rebuilding of Sichuan will dominate China's economy on the surface in the months to come.

Yes, hardships will probably become more obvious in the poorer regions of the country in the months to come, but they will not dictate the course of China's economy. I have come to learn, China can not grow to infinity on its own, if it could, my Chinese stocks would not be hurting so greatly right now. China can however soften the impact it will feel from the global financial meltdown underway right now.

After researching, analyzing and attempting to no avail to decipher the commodity trade between China and South America, one thing I can say for certain is that the recent plunge in commodity prices will help China continue to prosper, not hurt it. Record high prices of everything from copper, iron ore to energy had become a genuine problem for many industries here in Asia.

In the coming months it will be interesting to see how and if a new balance can be established, and where prices will settle. I'll leave my personal observations here, and I hope to be able to soon be in a position where I can begin bringing news, analysis and my personal observations to all readers of this site.

Wednesday, October 1, 2008

Most people think of Latin America and Asia as two regions separated by culture, language and history. Yet, Asia and Latin America are more connected than we imagine.

In recent years, political and economic ties between Latin America and Asia have deepened. Not only have government–to-government links and interactions grown, but companies from both regions have increasingly come to realize the potential for doing business with each other. The growth in total trade flows between Latin America and Asia bear testament to this, having risen to reach US$267.3 billion in 2007, an increase of 24 percent over 2006 (click here to read more)....

ASEAN AND UNASUR

In ASEAN, there has been good progress made towards achieving the ASEAN Economic Community. The recent conclusion of negotiations for the ASEAN-Australia-New Zealand FTA as well as the ASEAN-India FTA Trade in Goods during the ASEAN Economic Ministers Meeting in August will not only continue to deepen ASEAN’s internal integration, but also expand its external reach. In Latin America, 2008 bore witness to the establishment of the Union of South American Nations or UNASUR, which aims to create a single market and to integrate infrastructure (click here to read more)...

SINGAPORE'S GROWING LINKS

While trade links between Asia, as well as Singapore, and Latin America have grown, there is scope to do much more. For example, bilateral trade between Singapore and Latin America increased at a compounded annual growth rate (CAGR) of 17 percent over the last three years to reach US$8.89 billion (SS$ 13.4 billion) in 2007. But this only represents 0.07 percent of total world trade and 1.6 percent of Singapore’s total trade with the world last year. There are many areas where there are opportunities for collaboration, be it in agri-business, food and beverage, electronics, oil and gas, transport, logistics or infrastructure. In fact, an increasing number of our companies have made successful inroads into Latin America in these sectors. To date, there are about 56 Singapore-based companies with 191 points of presence throughout Latin America engaged in a variety of business and investment projects.

Latin America’s infrastructure sector in particular has attracted the interest of a number of Singapore companies. Latin American governments are placing increasing emphasis on investing in robust, well-integrated and efficiently managed infrastructure to sustain growth. This presents opportunities in transportation & logistics, urban planning, water and waste management, industrial park development, and oil & gas, amongst others, in both regions. Latin America’s need for expertise in infrastructure development dovetails well with Singapore companies’ infrastructure development capabilities and search for new markets (click here to read more).Click here to access the full article from Latin Business Chronicle

Venezuela's President Hugo Chavez on Tuesday called for oil producing countries to create an oil bank and warned oil prices could fall further.

"We once proposed the creation of an OPEC Bank...but it wasn't adopted. Lets work with the idea of an oil bank, a couple of oil (producing) countries can do it," Chavez said as he arrived in Brazil for a state visit.

SINGAPORE, Sept. 30 (Xinhua) -- China has the muscles to push short-term domestic growth, but Japan and South Korea will continue to grapple with various difficulties in trying to rev up their sluggish economic engines into higher gear, said Standard & Poor's Ratings Services here on Tuesday.

In recent separate reports on the three countries, S&P said China will steer its economic policy toward supporting growth, despite some anticipated hurdles, while Japan and South Korea both face political stalemates, high oil and food prices, decelerating growth, among other issues.

The report said China is counting on its strong domestic demand to pull its economy ahead this year and next, "We expect tight labor market conditions, together with the implementation of the new Labor Contract law this year, to keep wage growth strong and lower uncertainties faced by employees." Click here to access the full article from Xinhua

5) South American leaders blame financial crisis on US irresponsibility reports Mecropress

Four of South America’s leaders meeting in the Amazon accused the United States on Tuesday of "irresponsibility" in its handling of a financial crisis that has dried up credit markets and threatens economies around the world.

Brazil’s Lula da Silva said that rich nations are responsible for the global financial crisis, and called on the US Congress to pass a solution quickly. Emerging markets, including Brazil, are better prepared to weather the crisis than the US, he said.

“We did our homework and they didn't”' Lula said. “Those that spent the last three decades telling us what to do didn't do what they had to do. The crisis is very serious and so profound that we don't know how big it is”.

Venezuelan President Hugo Chavez warned the crisis could slow economic growth across Latinamerica and predicted that US economic power is in dramatic decline.

"This crash of capitalism and of neo-liberalism will be worse than that of 1929" Chavez told reporters at the Manaus city meeting. “No country can say it won't be affected''.

Brazil’s Bovespa suffered its greatest loss in one day since 1999. Trading dropped 13.8% before beginning to recover towards the end of the day.

Before President Lula da Silva had to come out and insist that the global financial crisis would have a limited contagion for Brazil. Trading had to be stopped for 30 minutes after the crash reached the 10% threshold but once restarted continued to fall until at the end of the day the index settled at 46.028 points, down 9.4%.

In Argentina the MERVAL index skid 8.7% and in Mexico the IPC, 6.4%; in Chile the loss was 5.7% and in Colombia, 2.37%.

For Chile it was the worst daily fall in a decade and for Argentina’s Merval the blackest day since February 11, 2002 when the market crashed 10.68%. The Argentine stock exchange has lost 13,5% in September and 30% since the beginning of the year.

The United States House of Representatives voted unanimously on Monday to approve a one-year extension of trade benefits for Colombia, Peru, Ecuador and Bolivia that expire at the end of the year....Click here to access the full article from Mercopress

8) Lima's stock market plunged 15.35% in September

Lima, Sep. 30 (ANDINA).- Lima Stock Exchange (BVL) plunged 15.35 percent in September, the second biggest month drop in 2008, after a 18.73 percent decrease in July, amid an international financial crisis worsening, said Tuesday the general manager of Seminario Brokerage (SAB), Roberto Seminario. The BVL was hurt by external factors linked to a metal price drop and a collapse of several American financial institutions such as Lehman Brothers, Merrill Lynch, Bear Stearns and Washington Mutual...

Chinese buyers of Indian iron ore are defaulting on import contracts and refusing to lift the ore unless the seller offers a discount on contracted prices, a top industry official said on Monday.

"Our exports are in deep red as there is no demand from China," said Rahul Baldota, president of the Federation of Indian Mineral Industries and managing director of miner MSPL Ltd.Chinese appetite for Indian ore has fallen despite rival Brazilian miner Vale`s demand for higher prices for the ore it exports to China -- a move that initially cheered Indian suppliers.

Nearly 75% of India`s annual iron ore exports of about 100Mt go to China, and shipments normally rise after the annual rainy season ends in September.

"The Chinese are backing off old contracts. They are saying either you reduce the price or we can`t take the shipments," Mr Baldota said. "I, myself, have had to suffer two cancellations." Click here to access the full article from Mining-Journal